A Million Points of Capitalism

I recently read a post where the author complained that the independent/freelance lifestyle is hard, and isn’t for everyone. Of this I have no doubt.

The basics of capitalism, whether you are an individual or a corporation, are the same. You have a product or service you believe is worth some amount of compensation (hopefully more than it cost you to produce and/or deliver it). You must make people aware that you even have such an offering available (marketing), you must convince people that it is of value (sales), and you must deliver that value (execution). Pile on top of these three different functions the need to administer all of the finances and paperwork required in whatever jurisdiction you are operating, and you have quite a broad range of skill sets required to effectively function as a capitalist entity.

No wonder the independent/freestyle lifestyle isn’t for everyone! To both produce the service or product and to market and sell it and to manage all the business accounting and paperwork…these are not skill sets vested in every individual. Corporations formed in recognition of the fact that bringing together multiple individuals with different specialized skill sets might produce a more effective capitalist “entity” than an individual could achieve. Growth of the corporate entity engendered increasing specialization of skills, til you have today’s typical corporation. In this corporation, most individuals are relegated to a very specific set of functions and skills, and the value assigned by the corporation to those skills is a low as possibly can be set and still obtain the necessary function by the individual.

This difference in what the corporate entity is selling (revenue) and what it can get away with paying its constituent individuals (expenses) is the profit of the corporation.

Most of this profit in today’s corporations goes to the owners/shareholders of the corporation, which in most cases are not the same people as the workers of the corporation. Capitalism doesn’t prohibit the workers and owners being the same people (such as with co-ops), but in general it incents against that case, favoring instead those with “capital” to invest in and create the corporation. (Hence — “capitalism”).

The more costs/expenses corporations can “externalize,” the better those profits are. So there is always a pressure to minimize and externalize costs. The internet is enabling new business models which carry this tendency toward ultimate expressions of externalization. Uber and Airbnb are two examples. Both companies rely completely on an “independent contractor” workforce, where those contractors provide the actual assets being rented/leveraged for profit. Both companies sell access to resources that they do not actually own or control. These are almost perfect capitalist entities, with almost all costs externalized and a guaranteed share of profits generated from the independent workforce going straight to the corporation and its owners.

For this model to work, it requires there to be literally millions of new independent entities willing to contract with the corporation to offer their resources (work, time, assets) in exchange for the corporation taking on some marketing, sales, and administrative functions.

And those independent entities are subject to some of the most ruthless market darwinism ever seen. Whether or not you get to participate in the privatized economy depends completely upon the corporations. If you don’t meet their criteria, or annoy some corporate lackey, you can quickly find yourself out in the cold, unable to participate in the new economy.

What’s left then are the “wage slave” jobs, the indentured servitude positions that pay just enough for you to live and eat and sleep to come back and do it again the next day.